New Delhi, March 10 The production of LPG, CNG, and piped cooking gas will take precedence over all other sectors using natural gas, as the government has restructured allocations to ensure uninterrupted supply for households and transport sectors.
Following the widening conflict in the Middle East, which disrupted 30% of India's gas supply, the oil ministry issued a notification ordering the diversion of available gas from non-priority sectors to key users.
India meets about half of its 191 million cubic meters per day (mmscmd) of gas consumption through imports. With the disruption of tanker movement through the Strait of Hormuz, about 60 mmscmd of gas from the Middle East has been affected.
The remaining liquefied natural gas (LNG) has been re-prioritized to meet 100% of the demand for LPG production, CNG, and piped cooking gas (PNG), 80% of the needs of commercial users, and 70% of fertilizer unit needs.
"We are closely monitoring the situation and are responsive to the evolving needs. We have just re-prioritized gas allocations to fully meet the demand of key sectors," a top ministry official said.
The re-allocation is primarily aimed at augmenting LPG supplies, which had been strained after the conflict in the Middle East disrupted half of the cooking gas supplies.
Liquefied petroleum gas (LPG) is primarily produced from the processing of natural gas and is also a byproduct of crude oil refining. It is produced by separating and purifying propane and butane gases, which are then pressurized into a liquid state for easy transport and storage in steel cylinders, typically found in homes and restaurants for cooking.
According to the notification issued on Monday, this latest order overrides all existing contracts and other commercial arrangements for the sale of LNG.
The freed gas will be allocated based on a priority list based on actual average usage over the past six months, the notification said.
With LPG production from traditional sources at saturation levels, the government has also previously ordered refineries to maximize output by diverting streams from petrochemicals.
"There has been a 10% increase in production following these measures," the official said, without providing further details.
He said that original contracts will be restored once normalcy returns.
"We hope that happens soon," he said. "In the meantime, we have been actively sourcing supplies. We have had some success, and we will continue to pursue all available opportunities."
Until now, compressed natural gas (CNG) and piped cooking gas were the two priority sectors to receive domestic natural gas as their raw material. Under the revised allocation, the requirements of LPG, CNG, and piped gas manufacturers will be fully met before natural gas is supplied to other sectors.
The supply of natural gas to the domestic piped natural gas grid, CNG for transport, and LPG production will be treated as priority allocation. They will receive 100% of their average gas consumption over the past six months, the notification said.
Fertilizer sector is at second place, with at least 70% of its past six months' demand being met.
At number 3, gas supply to tea industries, manufacturing, and other industrial consumers will be maintained at 80% of their past six-month average gas consumption, subject to operational availability, the notification said.
All city gas distribution (CGD) entities supplying gas to industrial and commercial consumers have been placed at number 4 on the priority list. They must ensure their customers receive 80% of their past six months' average gas consumption, subject to operational availability.
Domestic gas production, which meets about half of the country's 191 million cubic meters per day consumption, will be diverted to the priority sectors by curtailing supplies to petrochemical plants, power units, and high-priced gas consumers.
Following US-Israeli strikes inside Iran and Tehran's sweeping retaliation across the region, maritime traffic through the Strait of Hormuz has sharply declined, insurance premiums have surged, and energy markets have responded with immediate volatility. Roughly one-fifth of the world's seaborne oil and nearly a third of global LNG shipments pass through this narrow channel linking the Gulf to global markets.
The artery is the conduit for the supply of most of India's import of gas, in the form of LNG, as well as LPG. With tanker movement being stalled, the government has reworked domestically available gas to keep priority segments such as cooking needs of households and vehicular transport going.
Natural gas pumped out of the ground or below the seabed is used to generate electricity, produce fertilizer, and is turned into CNG or LPG and piped to households for cooking.
"The Central Government has assessed that the ongoing conflict in the Middle East has resulted in the disruption of liquefied natural gas (LNG) shipments through the Strait of Hormuz, and suppliers have invoked the force majeure clause," the notification said, adding that the supply cuts would entail the diversion of natural gas to the priority sectors.
The allocation rejig has been done to maintain supplies and ensure equitable distribution and availability of natural gas for priority sectors.
Pipeline compressor fuel and other essential pipeline operational requirements have also been included in this priority, as without gas, the pipelines cannot function.
Oil refining companies shall absorb the impact of LNG supply disruption to the extent feasible by reducing gas allocation to refineries to approximately 65% of the past six-month gas consumption, it said.
State-owned gas utility GAIL has been tasked to manage the supplies of natural gas to implement the priority order.